The Wall Street Journal (April 16, 2004) reports, “For as long as companies have published cash-flow statements, investors have used them to gauge the credibility of earnings. The most closely watched portion of these reports is the part called cash flow from operating activities. If a company shows strong earnings but generates little cash flow from its core operations, it could be a warning sign that the earnings are illusory. Conversely, many investors take comfort in the quality of a company’s earnings if they also see robust operating cash flow.”
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